In the central bank can be: 1) control

In the beginning, I want to present the main conceptand tasks of the monetary policy. Monet?ry policy occupies ?n important placein the life of society.

Monet?ry policy is one of the four m?jor m?croeconomicinstruments, based on the ?bility of the monet?ry system to influence the money supply ?nd, ?ccordingly, the interest r?te, andthrough it on investment and re?l GDP. The go?l of themonet?ry policy is to ensure st?ble economic growth, full employment ofresources, st?bility of the price level, b?lance of p?yments equilibrium. Monet?ry policy is implemented bythe centr?l bank. However, the ch?nge in the supply of money in the economyoccurs, bec?use of the oper?tions not only of the centr?l bank, but also ofcommercial b?nks, as well ?s decisions of the non-b?nking sector (households?nd firms).

T?ctical goals of the monet?ry policy of the central bank can be:1) control over the supply of money (money supply); 2) control over the levelof the interest rate; 3) control over the exch?nge rate of the nationalcurrency. The instrumentsof the monet?ry policy change in the norm of m?ndatory reserves; change in the discount rate of interest (refinancingrates); open m?rket operations. The macroeconomic situation of the country hasthe main impact on the monetary policy. So, I want to start from themacroeconomic situation in Kazakhstan. The role of the National Bank ofKazakhstanOne of the main goal of the activity of the National Bank of the Republicof Kazakhstan is the realization of monetary policy and the effectiveness ofthe monetary policy depends on the development of measures to stabilize theeconomy.

The National Bank of the Republic of K?zakhstan, as a st?te body of economic m?nagement, has agreat influence on the credit ?nd fin?ncial system. So, its impact is very hugeon the effective functioning of ?ll credit and financial institutions.Therefore, the issues of approaching the functions of the National Bank of theRepublic of Kazakhstan to the functions of central banks of countries withdeveloped market economies become topical. The NBK is the only body thatdetermines and implements the state monetary and credit policy of the Republicof Kazakhstan. Monetary policy is implemented by the National Bank ofKazakhstan in order to ensure price stability. The National Bank of theRepublic of Kazakhstan occupies a special position among legal entities engagedin managing the economy of the country. The National Bank does not pursueprofit in its activities. It does not compete with commercial banks and otherlending institutions in financial markets.

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Its main goal is to ensureuninterrupted supply of funds to the economy by means of payment or otherwiseto provide the necessary level of liquidity, to establish a settlement system,to control the work of ordinary banks. Thus, the economic essence of theNational Bank of the Republic of Kazakhstan consists in its appointment as acentral bank whose legal status allows it to coordinate and regulate theactivities of credit and financial institutions. In order to ensure pricestability in the country, the National Bank takes the necessary measures ofmonetary regulation, using legally established instruments and operations.

Itshould be noted that the National Bank may only influence on monetary factors:money supply, monetary base, domestic credit. By regulating the amount of moneyin the economy, the National Bank has an indirect effect on the formation ofconsumer prices in the country. In the event of an increase in inflationary pressure,the National Bank conducts operations to withdraw liquidity on the moneymarket. In particular, the volume of operations for issuing short-term notes,attracting deposits from banks is increasing. The rates of the National Bankare increasing, namely, the official refinancing rate, deposit rates. As aresult, the volume of money supply in the economy is decreasing, and with acertain time lag this affects the reduction of the inflationary background.

Instruments ofMonetary Policy of the Republic of KazakhstanOfficial refinancing rates. The National Bank ofKazakhstan sets an official refinancing rate depending on the overall state ofthe money market, the demand and supply of loans, inflation and inflationexpectations. The official refinancing rate is a benchmark for remunerationrates for major monetary policy operations.

The official refinancing rate forthe 16 January 2018 is 9,75%. The official refinancing rate decreased (comparedto the year 2017). As the level of inflation rate became lower to the end of2017, the National Bank decided to reduce the official refinancing rate.Minimum reserve requirements. To ensure thebalance of the money market and regulate the liquidity of banks, the norm ofbanks’ mandatory reserves was reduced from 10 to 8% of the total depositliabilities of the bank to non-bank legal and natural persons. Reducing theminimum reserve requirements did not lead to a weakening of the protection ofthe interests of depositors and creditors of banks, but, on the contrary,allowed banks to more effectively manage the funds raised and increase lendingto the real sector of the economy.

Open market operations. In order to regulateliquidity in the banking system and sterilize the money supply in 2017, the NationalBank carried out the transactions in the open market for the purchase and saleof securities, to repurchase and reverse repurchase transactions. Loans of the National Bank. In 2017, Banks ofKazakhstan provided loans for KZT 12705 352. Also, the National Bank of the Republic of Kazakhstanprovides deposit operations. And the main goal of this operations is to attractfunds to deposits and their placement in interbank loans. Monetary aggregatesThe behavior of monetary aggregates during the reporting period was due tothe nature of past trends.The monetary base.

The increase in the national currency of the National Bank of the UnitedKingdom by 37.6% to $ 2,093.9 million. However, the monetary base expanded only5.7% to 134.0 billion tenge. This was due to the fact that, starting from thesecond half of the year, the National Bank intensified operations to sterilizeexcess liquidity.

The growth in net internation?l reserves of the N?tional B?nkwas neutr?lized by an incre?se in the volume of short-term notes in circulationby 7.9 times (or by 43 billion tenge) ?nd by an incre?se in the Government’sdeposits by 2.3 times (or by 26.8 billion tenge).

Money supply. The dyn?mics of the assets of the b?nking system was positive. Thus, netexternal ?ssets of the banking system grew by 15.9% (or by $ 294.9 million),while internal assets of the b?nking systemincreased by more than 5.2 times (or by 71.

3 billion tenge). The growth ofdomestic assets of the banking system was due to a significant increase indemand for other sectors of the economy by more than 1.8 times (or by KZT 137billion) (despite a decrease in net claims to the Government of the b?nkingsystem 26.9% ?nd net other of the ?ssets of the b?nking system – by 30%). All thesefactors contributed to an increase the amount of money supply by 45.

9% (KZT399.5 billion).Main targets of the Monetary Policy in the year 2018Based on the current situation inKazakhstan and the world oil markets, the main objective of the NBK will be toensure price stability. Existing in recent world markets have a positive impacton the macroeconomic development of Kazakhstan and at the same time cause anumber of problems. One of them is the excess liquidity of the banking system,including external borrowings of enterprises in the real sector and commercialbanks, which leads to rapid growth of loans in the economy. The situation isexacerbated by a significant influx of foreign investment, as well as anincrease in public budget expenditures in recent years. In these conditions, athreat of overheating of the economy is possible. The goal of monetary policywill be to keep inflation.

To achieve this goal, the NBK is strengthening itsimpact on monetary policy operations to further enhance the regulatory role ofits key rates. The NBK’s actions foreseen in the near future will affect theliquidity of the banking system, which coincides with the interim goals of themonetary policy pursued by the NBK. Despite the envisaged measures to limitliquidity in the next three years, the annual growth of monetary aggregateswill ensure the preservation of the existing rates of economic growth. Thetightening of monetary policy implies a change in the direction of influence ofofficial NBK rates on market rates on loans. If in previous years the NBKmeasures were aimed at resolving the task of boosting the activity of banks inlending to the economy, including reducing rates, then, in the circumstances ofthe need to prevent overheating of the economy, the issue of rate reduction isno longer set as an end in itself. ConclusionThe main goal for the monetary policy of the republic of Kazakhstan will bemaintaining the medium-term inflation target –below 4%. National Bank willfocus on stability functioning of the economy; price stability and improvingindicators of the yield curve. In conclusion, I wouldlike to add that developing countries should not replicate the experience andresults of their neighbors and other developing and developed countries whendeveloping their own monetary policy.

The same monetary policy can lead tocompletely different results. This comes primarily from the prerequisites forcingthe Central Bank to pursue a corresponding monetary policy. Any state, bothdeveloped and developing, should attach great importance to the Central Bankand its monetary policy. The Central Bank should be fully independent in itspolicies. At the same time, it is important to take into account that the goalsof the government do not contradict the CBR’s monetary policy. In the processof implementing monetary policy, the Central Bank should try to ensure thenecessary expansion of loans and the size of the money supply corresponding tothe long-term needs of the growing economy of developing countries, whilerespecting the stability of domestic prices. In a shorter period, monetarypolicy should not allow undue inflationary or deflationary processes.

The mostimportant objective of monetary policy should be price stability, which, withthe provision of which conditions are created conducive to economic growth. Foreffective implementation of monetary policy in developing countries, it isnecessary for monetary authorities to set priorities, objectives and ways toachieve them, drawing on the experience of developed and successfullydeveloping countries. Before conducting monetary policy as a powerful tool forregulating the economy, an objective assessment of the current situation in themonetary and credit sectors and in the economy as a whole should be given. Thebodies that develop and evaluate monetary policy must constantly monitordevelopments in the economyMacroeconomic situation in theRepublic of KazakhstanPreservation of favorable conditions in the world economy and on externalfinancial and trade markets contributed to Kazakhstan’s achievement ofsustainable economic growth and improvement of the macroeconomic situation inthe country. GDP growth in Kazakhstan in January-May 2017 increased by 4.1%,compared with 2016.

Inflation since the beginning of the year amounted to 3.3%.Inflation in annual terms fell to 7.

5% compared with 16.7% in May 2016. Monthlyinflation in May 2017 was 0.5%. The volume of investments in fixed assetsincreased by 5.2% (5.5% in January-April 2017, 3.1% in January-March 2017).

Thegrowth is due to the implementation of industrial-innovative and infrastructureprojects. In January-April, 2017, by sector, a significant increase in investmentswas observed in agriculture by 26.3%, to 47.2 billion tenge (150 million USD)and real estate transactions by 13.5%, to 251.8 billion KZT (796 million USD).

The average nominal cash income of the population in January-April 2017amounted to 308.4 thousand tenge and increased by 8.2% in nominal terms incomparison with the corresponding period of 2016, in real terms by 0.5%. So,the main activities of the National Bank on monetary policy were aimed atensuring low inflation rates and maintaining a stable nominal exchange rate oftenge. The growth of the gross domestic product (GDP) of Kazakhstan in 2018 isexpected at the level of 5%.

Orientation of the MonetaryPolicy in the Republic of KazakhstanSince 2002, the benchmarks of monetary policy achieved the relativemacroeconomic stability in the country. The main goal of the monetary policy ofthe National Bank of Kazakhstan (NBK) in this period was run-up and preparationto the principles of inflation targeting. Such monetary policy meets the mainobjective of the National Bank to reduce inflation and, moreover, provides itwith a greater confidence of market participants and the pursued monetarypolicy. To sum up the experience of countries, the following factors are thebasis for successful introduction of the system of inflation target indicators:-Sustainable budgetsituation;-Guarantees of macroeconomic stability;-Stability of the financial system;-Independence of the Central Bank;-Sufficient understanding of the interrelations between the instruments of theCentral Bank;-Information openness.

In 2016-2017, the goal of the  monetary policy of the NBK was ensuring theinternal and external stability of the tenge. The main goal of the monetarypolicy of 2017 was to keep inflation at around 6%. To achieve these goals, thepulp and paper mill used open market operations and re-accounting operationswith promissory notes as its main instrument. The persistence of inflation inthese limits was facilitated by substantial economic growth, accompanied byhigh consumer demand and investment activity. The significant growth ofmonetary aggregates contributed to the persistence of inflation in the economy.

The consequence of high consumer demand was an increase in cash in circulationby 59% to 379.3 billion. In order to prevent a significant strengthening of thereal exchange rate of the tenge, as well as to smooth fluctuations in theexchange rate, the NBK participated in the domestic foreign exchange market asa buyer. The international reserves of the country as of January 1, 2017amounted to 90.8 billion US dollars and from the beginning of 2016 decreased by0.

6%, including the National Fund assets in foreign currency from the beginningof 2016 decreased by 3.9% to 61, 0 billion US dollars. Gold and foreigncurrency assets of the National Bank amounted to 29.

8 billion US dollars andsince the beginning of 2016 grew by 6.9%. In order to contain inflation growthrates, the NBK in 2017 took measures to strengthen the regulatory impact ofofficial rates.

To increase the role of the refinancing rate since 2004, thebills are recounted in accordance with the official refinancing rate.In 2017, the priority of the monetary policy of the National Bank was to maintaina low inflation rate. The policy of free floating exchange rate of tenge wascontinued.

As instruments for regulating short-term liquidity of the bankingsystem, operations were used with short-term notes, operations with governmentsecurities on the open market, regulation of official rates, refinancing ofbanks by re-calculation of bills, provision of short-term loans to banks formaintaining liquidity (day and overnight). To smooth the sharp short-termfluctuations in the exchange rate of the tenge and to prevent excessiveappreciation of the tenge, operations were conducted in the domestic foreignexchange market (buying and selling foreign currency). The exchange rate of thetenge in relation to the US dollar decreased from 315.22 to 312.24 in 2017,which obviously happened under the influence of strengthening the exchange rateof the Russian ruble against the US dollar.

Since early 2017, the rate of USD /KZT has fallen from the level of 332.55. The below chart represents thechanging of the official rate KZT to USD during the year 2017


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